Air India Seeks $1 Bln In Compensation From Boeing For Dreamliner Delays

3/14/2012 11:20 AM ET

Air India Ltd. is negotiating for compensation of $1 billion from Boeing Co.(BA) for delay in delivery of the 787 Dreamliner aircraft. Boeing, however, has offered to settle the issue for a little over $500 million. Due to the delay of more than three years, India's national flag-carrier reportedly owes more than $750 million to oil suppliers and airports. Meanwhile, India's leading airlines, including Air India have been in red.

It was in 2005 that Air India, with a worldwide network of passenger and cargo services, placed an order worth $6 billion for 50 long-range Boeing jets. In 2010, Air India had asked Boeing for a compensation of $840 million and negotiations have been on.

According to Dinesh Keskar, the planemaker's India head, delivery was delayed from last year as Boeing is still working with the carrier on certification, pilot training and introduction plans.

"The planemaker agreed two weeks back to pay a little over $500 million. We are asking for more, we are talking to them," said Prashant Sukul, joint secretary at the Ministry of Civil Aviation.

The debt-stricken Air India is seeking government support to continue its operations. The airline has already received 32 billion Indian Rupees in government bailouts since April 2009 Its rival Kingfisher Airlines is also struggling for survival.

Meanwhile, in mid-February, Boeing finalized a firm order from Indonesia's largest private airline Lion Air for 230 airplanes valued at $22.4 billion at list prices, making it the largest ever commercial airplane order for the aircraft maker.

The delivery of Dreamliner, once expected in May 2008, has been delayed several times due to technical reason, outsourcing and supply chain snags. Boeing has received 847 orders for the first mid-size passenger airplane capable of flying non-stop to distant cities without having to go through a hub airport. The jet has a price tag of around $200 million each.

The first commercial airplane with an airframe made largely of light-weight carbon composites and significantly high fuel efficiency got the Federal Aviation Administration and delivered the first plane last year.

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